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QUERY DESK

This is a limited access to the Query Desk, where we share some of the Queries we have answered. These are not recommendations, but a casual chat between a client and his advisor.

Client

22, Aug 19

Query

Subject: Auto stocks long term

Amit, your views on auto stocks mainly on PV major Maruti , Premium bike major Eicher Motors and CV stocks M&M, Ashok leyland

Admin Reply

16, Sep 19

Hi Sir,

India is a 2.5 Trillion$ Economy, We havent even seen what rich means.. There are only 21 cars in India for every 1000 People, Its 800 cars per1000 people in the United States, Even in afganisthan is 50 Cars for every 1000 People, In srilanka its 70 Cars for 1000 people, In China its 180 Cars for every 1000 People.. 

 

I am a Strong Believer of Auto as a Sector in India, Look at Companies which are not disrupted due to EV like Tyres etc or Consumer Monopolies like Eicher or Maruti... Ofcourse the Rule of the Game is changes with New technology but for now i am SuperBullish on Autoanciallaries for 10 years which are not affected by EV Change... I believe India will have 2-4x More Car in 2029 than what we have today.. 

 

The Total Numbers of Car's Sold in India is 40 Lakhs v/s 2.5 Crores in China! I

 

The current Slowdown is due to 2 things

1) Economic Slowdown

2) Ola/Uber gaining Share as young India wants to see Videos on Youtube & Instagram while they travel (JIO has indirectly disrupted Auto Industry, HAHA)

 

The 2nd Point cannot be changed but with economy growth coming back in India in 2-3 years, people will spend more money on Cars, Real Estate as Income improves!

 

Client

20, Aug 19

Query

Subject: Growth & Undervalue

Hi Amit,

Your strategy towards growth stocks is fantastic but I want to understand the concept of undervalued stocks. I think both kind of stocks can make huge money. So why are you focusing only on growth stocks. 

Please correct me if I am wrong. Also Gold is going in new territory so there r 2 big companies in this Mannapuram and Muthoot. 

What is the rationale behind selecting Muthoot ? Why not Mannapuram?

Admin Reply

16, Sep 19

Hi Sir,

I can speak about Growth Stocks, Trends, Scale up, New Products, Customers, Capital Allocation etc etc for 1 month continously non stop now because this is all i think about & know ..

Is the Any Stock you know which has created Sustainable Wealth Without Growth?

Is there Any Stock Which has Growth without Customers loving Them?

Is there any Stock which didnt launch new Products for Growth?

The biggest failures are because of bad capital Allocation.. Kodak Camera had the world first Digital camera but they were scared that launched that would finish their Films business.. A Market leader for 100 Years went bankrupt, Look at Nokia they had 53% Global Market share in mobile phones & they didnt spend 5-6 Billion & lost on a 1.5 Trillion Dollar Market cap Opportunity of Cell Phones!

 

Fallings Stocks are not Undervalued, Rising stocks are not overvalued... I am looking at Monopolies with large opportunity, Superb Management & Great FreeCash Slow, I hate Competitions!

Client

18, Aug 19

Query

Subject: Want to create wealth in next 10-15 years

Hi Amit Sir,

I'm 21 years old Chemical Engineer working in a Oil marketing PSU, I currently earn around 20 LPA and have started investing into equity 1 years ago. I spend 6-8 hrs daily studying the market. Few months ago I came across your advisory and after reading query desk, watching your videos, doing study of investment philosophy, looking at the past track record, I decided to take subscription of stallion asset. I have learnt a lot from your portfolio & Risk management systems, Style of Investing and have developed a Great conviction. I have invested all of my money as well as few lakhs taken from parents into our portfolio. At this point of time I can take higher risk and My goal is to become financially independent in next 10-15 years. My calculations show that with 10 Lakh upfront investment and monthly investment of 1.25 lakhs with 12% annual increment in investment, if we earn 26% CAGR in next 10 years (After few bull and bear market cycles), I will be having 10 Crore net worth in 10 years and 45 crore in 15 years (Effect of Compounding). Is this feasible ? Is there any Catch ? I don't seem to find any 

Thanks & Regards,

Mangesh Hase

Admin Reply

16, Sep 19

Hi Sir,

Stock Market Discounting & Excel are historically very risky combination but setting goals tells you a lot about the amount of Risk anyone would be ready to take.. The Index in India does 11% Returns with 20% Standard Deviation, Our Goal has to be to keep our Portfolio Beta at 1-1.2x while doing returns of 20-30%.. 

 

We need to take Less Portfolio level risk & we will achieve this CAGR easily if we consistently keep our heads down & have 0% emotional.. The Game is set now with the Government of India tracking markets more than us.. US Stock Market had trump where if the stock markets goes down by 10% he would tweet & calm the markets now we have the government who will come out to protect their own image if the Markets go down.. 

 

I am seeing massive accumulation in Midcaps & Smallcaps after Feb 2019.. Your Calculations seems correct, May the gods be kind to us, We will achieve your goals!

Client

24, Jul 19

Query

Subject: Thank you so much sir!

Dear Sir,

First of I would like to take the opportunity to say thanks to you amit sir and to your whole team for contionus guidance to stallion family through your vast knowldege bank! sir i am a unconditional fan of your energy and passion towards stock market.I had recently joined to stallion wealth by investing in the multibagger product and i am dem sure that in next 10,20 years not only me but each and every stallion family member are going to be very very very rich in their knowldege,understanding towards the stock market and in monetary terms.one more thing that i want share with you sir that today whatever small savings i have in my bank account,i had invested 100% of my savings in multibagger product bcoz i had full confidence on passion,energy, smartness,honesty and your leadership capability.once again thnak you so much sir.

Best Regrads

Investor Pratik Shah 

Admin Reply

27, Aug 19

Hi Sir,

Thank you so much for the love.. I dont know if investing 100% of your wealth in Multibagger is right strategy or no but i can with 100% confidence tell you that i have also  ALL IN Stallion... We are absolutely on the Same boat... In Life You need to make some large decisions which matter...

 

I made four Large decisions which will decide my Future

 

1) Quitting my Job well paying job when i was 24 Years old (Was working in a Global Asset Management Company & was a Kickass Analyst)

 

2) At Age of 29, i went a Big ALL IN & applied for PMS License hired extremely smart though Expensive people 

 

3) In May 2018, i took a very large call that i want to move into Quality Stocks & virtually changed a large percentage of our portfolio.. This somewhat helped us survive the bear market or just like 80% of advisory companies we would have been struggling.. 

 

4) There are copy websites of Stallion which sell our advisory at half our price & ofcourse our stocks get leaked on Whatsapp etc, We have changed the Moat from Stock Names to Query Desk, Stock Feed, Monthly Newsletter, Personalized Relationship Managers & Concalls.. To the best of my Knowledge no advisory does these things ( Massive Value Addition for our Customers)

 

All these decisions could have easily gone wrong but you need some luck (Karma)... In Life we have to take some calculated risks when you are conviced about something, see the worst case & the best case & do it.. I have seen all the Promoters i meet, they all went ALL IN & took Calculated Risk when they really believed in something.

 

I know a lot of Stallion Family have a SME, I have learned one very important thing from all successful Businessman is that they should understand well is his customers & really work for solving their problems (I know i am saying this for the 1000th time but its very Important) & a Investor should understand the Screen! 

Client

18, Jul 19

Query

Subject: Growth Prospect of Logistics Sector

Hi Amit, Your view on Logistics sector and Future Supply Chain Solutions in particular. Projects like bharat mala, port development, rapid expansion of road network, infrastructure status to logistics sector, implementation of GST and eway bill bodes well for logistics sector in the long term term.

Admin Reply

27, Aug 19

Hi Sir,

Focus on the Strategy, not the Stocks.. Logistics have you seen anyone making money in India? Why should we be there, this sector is asset heavy, High Competition, Low ROE, Too much debt, Overloading challenges etc etc

 

Look at Strategies, not Stocks... What works what doesnt work in markets... There is no player except probably a VRL which dominates a niche.. Future Group is a Bull Market play, these IPO's like Mahindra Logictics & Future supply were build on a story of 3PL logistics but both of them Mahindra & Future supply do their own logistics via these subsidaries.. 

We need to Focus on Dominant Business models with leadership Positions (Sharks in a OCean)

Business Model Dominance- There are four kinds of businesses Dominance.

  1. Shark in an Ocean
  2. Shark in a Pond
  3. Fish in an Ocean
  4. Fish in a Pound

First is shark in an ocean- These are typically leaders in their own field with large opportunity size. These are the business that we would typically invest in.

Then you have a shark in a pond. These are basically like Hero Honda right now. With 35% market share it can’t do much, so the opportunity is not growing too fast. So, the company is large, but it’s basically exhausted the opportunity, Colgate also fits here or Refinery business of Reliance.

Then you have a fish in an ocean. These are the small businesses. I’d say most of these get eaten by a shark. If they don’t get eaten by a shark, then they become very smart and large.

Then you have a fish in a pond. Basically, small businesses small opportunities, we are typically not interested here.

So, the only sustainable way to make money and retain money is to bet on sharks in an ocean. That is basically our consistent compounder portfolio.

Client

12, Jul 19

Query

Subject: Coffee can portfolio in India

Hi Amit,

If you have to create a coffee can portfolio ( Buy and hold for long term like a decade  with moderate changes every year), which stocks you would select  and what would be your criteria for those?

I am more interested in identifying the criteria for shortlisting these companies .

Admin Reply

08, Aug 19

Hi Sir,

I am not a fan of Buy & Hold, I believe it wont work very well ! Yahan Waqt Badalta hai, Thodi Mehnet karni padti hai ! I have seeing that the Lowest Churn of Mutual funds is 25-30% a year, even they dont do buy & hold.. 

 

There is a popular fund manager in London with 16 Billion Pounds under asset & has a 10% Churn in last 15 Years in the Global Developed but the same fund manager has 40-60% Churn in Developing Markets

Client

09, Jul 19

Query

Subject: curious about PMS Performance

Hi Amit - Can you disclose how you guys are doing with the PMS business? I know you started not too long back, but still want to know where you stand as of date from your starting point

Admin Reply

08, Aug 19

Hi Madam,

We are doing ok there (Not very happy here as i am not achieved 20-30% Returns), 1st November 2018 we started with our First Trade on the PMS, since then as per SEBI Data till 30 July 2019 we are up +8.54% v/s -7.38% for the Benchmark.. 

 

Since 1st January 2019 till 31st July 2019 as per SEBI data We are up +6.34% V/s -10.93% for the Benchmark..

 

You guys can see PMS Performance on SEBI's Website.. 

Client

04, Jun 19

Query

Subject: PI industries, LTTech and Gruh

Hi Amit,

 

Have following queries:

 

1. U replied that u see PI going up 3-5x over five years with fantastic management which fits exactly with Multibagger thesis, then why aren't we buying it?

 

2 Do u think now we should subscribe in L&T tech Ofs considering its one of ur preferred picks in technology

 

3 hdfc ltd did bulk deal in Gruh at 260 last week, is it possible to get some block for stallion family?

Admin Reply

06, Jul 19

Hi Sir,

PI Industries is able to attact kickass talent - Dr Raman Ramachandran (ex BASF India Chairman and MD) as its CEO for the next three years. Dr Ramachandran has deep expertise in agrochemical business (on R&D and distribution side) and has spent most of his working career with BASF which should help PI build deeper relationships with global MNCs. Mayank Singhal (promoter and outgoing CEO) will now be designated executive VC & MD.

 

PI Is now managed by Professionals but still has Great Entreprenuer Spirit. 

 

1-2 Months Back they also Hired Dr KVS Ram Rao from Dr Reddy & my People tell him he is a star as CEO of CSM Business. 

 

I dont know if it will be 5x in 5 years or no but its a great business model & now has a superb Team

 

The Rest Two question are easily understood by our Actions.. 

Client

04, Jun 19

Query

Subject: Query on the Pharma Sector

Dear Amit - In your June newsletter you wrote that you would concentrate on the 4 Key Sectors: Financials, Consumer, Pharma and IT. You also said that after making an exit from the 2 Infra stock from our Portfolio we would be sitting on 18% cash. And then you mentioned that you are looking to make new investments in Technology, Consumers and Real Estate. 

My question is what about the Pharma sector which is part of what you said would be the 4 key sectors and still does not come in your plans for the new investments?

Pharma currently is quite low.. Are we waiting for some more downside?

 

Admin Reply

06, Jul 19

Hi Sir,

There are three types of Pharma Companies 

Indian Companies who sell to the USA typically generics - I believe stringent USFDA audits and heightened competition are structural issues for US generics not cyclical issue. India is already 40-50% Market share of Generics in the USA & there is massive pricing pressure here as ofcourse this is just a commodity business. 

 

MNC Companies selling in India - Pure-play generics push is high on Government’s agenda & this scheme of Aushadhi is scaling up really fast where you can get a 50-80% discount on generics but till now it hasnt had a impact low prescriber confidence and sub-par chemistry standards are roadblocks. Price controls are here to stay, while initiatives like Ayushman Bharat and Janaushadhi stores could enable the Government to push pure-play generics.

 

Indian Companies Selling in India - Larger names like Dr. Reddy’s and Cadila are re-focusing on India yet India. India's Pharmacetical Market size is 1.2 Lakh Crores in Total & about 10-15k Crores of Profits. MNC's are 17% Market share, Indian Domestic Large Pharma companies are 58% whereas other small players are 26%.

 

There are two types of diseases i.e. Chronic (Heart or diabities) or Acute (Cold, fever etc)

 

Typically i would like to Bet on a B2C Company in Pharma Growing at 15-20% in the Indian Pharma Market with a large share of Chronic!  We havnt got such deal yet

 

 

Client

03, Jun 19

Query

Subject: How you are going to achieve alpha return

IN THIS BUSINESS, IF YOU ARE GOOD YOU ARE RIGHT SIX TIMES OUT OF TEN. YOU ARE NEVER GOING TO BE RIGHT NINE TIMES OUT OF TEN - PETER LYNCH.

Sir, in our portfolio -

3 Stocks - could be multibagger 

7-10 Stocks will perform mediocrely

3 Stocks will not perform or could make the loss

What here I want to say is that if we keep maintaining 10% upper limit for our core stocks then how we are going to get a big return on our portfolio?

Please provide a detailed answer here about how you going to achieve an alpha return while you are cutting weights on your stocks which are performing.

Amit Sir you and I are here to make BIG MONEY in the market but if you keep cutting weights on stocks which are performing well and moreover they are our core bets then how we are going to achieve our GOAL.

Thanks 

Vasu Lalan

 

 

Admin Reply

06, Jul 19

Hi Sir,

Well Peter lynch wasnt in India.. Here sometimes you face risk from SEBI (ASM & Mutual Fund Exposure), Sometimes from RBI (Nessesary Dilution), Sometimes from the Prime Minister (Demonetization), Sometimes from Promoter (Spencer buys Godrej Natures Basket) & just incase you survive from these risk you also have business risks (Current consumer slowdown).. Ofcourse i am not even getting to corporate governance part.. Just Incase You get a company which doesnt get affected by these risks then you have think about Valuation risk that you have to take.. If you get a Company which you believe is Value Stock but has corporate governance issue you will see that stock going from value to deep value to Deepest ever value in no time, the only think that will keep increasing is your margin of safety!

 

India is not an easy Trade in the Short term, You will have bullets from all sides every week believe me.. I understand what you are saying, totally do & your right but when trend reverses you need to panic & get out.. What i have seen is that the only time a normal person believes that a good time to sell stocks is a 52 week highs, No Thats not true, the only time to sell a Stock is when either Price Trend or Earning Trend Breaksdown.. 

 

I have been in this business for long time, my goal isnt to make sure that just the Model portfolio performs (I am confident on this one) but to make sure that the stallion family participates in it.. 

 

Consistent Profit Booking wont have a big problem if we can have a good capital Allocation strategy & based on backtest on our own history of Last 5-6 Years, consistent profit booking didnt decrease any alpha instead it increased our returns by 1.25% CAGR.. 

 

I totally understand what your trying to say & I agree to it partially but in a advisory model i dont think thats possible.. 

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